Fraud
Original Implementation: January 28, 1997
Last Revision: November 2, 2015
INTRODUCTION
This policy establishes procedures and responsibilities for detecting, reporting, and resolving
instances of known or suspected fraudulent activity. The intent of the policy is to protect the
assets and interests of the university, prescribe a coordinated approach toward investigation and
resolution of fraudulent activity, and outline specific responsibilities for individuals responding
to the investigation of a fraudulent activity. Retaliation for filing a good faith report regarding
suspected fraudulent activity is prohibited by this policy and is cause for disciplinary action, up
to and including termination.
DEFINITIONS
A. University - Stephen F. Austin State University (SFA) and all of its components, regardless
of the source of funding.
B. Employee - All persons receiving compensation from the university, including faculty, staff,
and students. The term also includes any volunteer who provides services to the university
through an official arrangement with the university or a university organization.
C. Management - Any administrator, manager, account holder, director, supervisor or other
individual who manages or supervises funds, assets, or other resources, including human
resources.
D. Fraud - A representation usually of fact about a material point which is intentionally,
knowingly, or recklessly false to induce another to act to his or her detriment.
E. Fraudulent Activities/Fiscal Misconduct - Defalcation, misappropriation, and other fiscal
irregularities or improprieties meeting the definition of fraud in D) above including but not
limited to:
1. dishonest, illegal, or fraudulent acts involving university property
2. forgery or alteration of documents including checks, drafts, promissory notes,
securities, purchase orders, budgets, etc.
3. forgery or unauthorized alteration by employees of employee benefit or salary-related
items such as time sheets, payroll documents, billings, claims, surrenders, assignments,
or changes in beneficiary
4. forgery or unauthorized alteration by employees of student-related items such as
grades, transcripts, loans, fees, financial aid applications, or financial aid records
5. misappropriation of funds, securities, supplies, or any other asset of the university
6. illegal or fraudulent handling or reporting of money transactions
7. employee acceptance or solicitation of any gift, favor, or service that might reasonably
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tend to influence the employee in the discharge of his or her official duties
8. theft, destruction, or disappearance of records, furniture, fixtures, equipment, or other
assets
9. misrepresentation of information on documents
10. authorizing or receiving payment for goods not received or services not performed
11. knowing, reckless, or intentional inaccuracies in the maintenance of books and records
or irregularities in financial reporting
12. any apparent violation of federal, state, or local laws related to dishonest activities or
fraud
13. any similar or related activity.
F. Suspected Fraudulent Activity - A reasonable belief or actual knowledge that fraudulent
activity has or is occurring. Failure to show an actual diversion of assets or loss shall not be
considered unreasonable belief.
MANAGEMENT RESPONSIBILITY
Management is responsible for detecting fraudulent or related dishonest activity in their areas of
responsibility. Management is responsible for establishing and maintaining a system of internal
control that provides reasonable assurance that improprieties are prevented and detected. Each
manager should be familiar with the types of improprieties that might occur in his or her area and
be alert for any indication that such a defalcation, misappropriation, or other fiscal irregularity
has occurred. When an impropriety is suspected, management should determine if an error or
mistake has occurred or if there may be dishonest or fraudulent activity.
Management will support the university's fiduciary responsibilities and will cooperate with
auditors and law enforcement agencies in the detection, investigation, and reporting of criminal
acts, including prosecution of offenders. Every effort should be made to recover university
losses.
REPORTING SUSPECTED IMPROPRIETY OR FRAUDULENT ACTIVITY
Any employee of the university who knows of or suspects fraudulent activity or improprieties
has the option to report suspected activity as follows:
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notify his or her immediate supervisor
notify one of the following university employees: the chief audit executive, the general
counsel, the chief of police, or the director of human resources; or
file a report using the university’s anonymous reporting system coordinated by the
Department of Audit Services for reporting dishonest or fraudulent activity. The
university’s reporting system, which is hosted by a third party, can be accessed 24 hours a
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
day by calling 1-866-294-9539 or clicking the “Report Fraud” link on the SFA homepage.
file a report with the Texas State Auditor’s Office by calling 1-800-TX-AUDIT (892-8348)
or visiting their website at http://sao.fraud.state.tx.us/Default.aspx.
All of these reporting options are listed on the university’s website homepage www.sfasu.edu
under the report fraud tab at http://www.sfasu.edu/audit/fraudreport.asp.
Great care must be taken in the reporting and investigation of suspected improprieties or
irregularities to avoid incorrect accusations or alerting suspected individuals that an investigation
or audit is underway, and also to avoid making statements which could provide a basis for a
lawsuit for false accusation or other offense. The reporting individual should not:
1. contact the suspected individual to determine facts or demand restitution
2. discuss the facts, suspicions, or allegations associated with the case with anyone, unless
specifically directed to do so by the chief audit executive, university police chief, general
counsel, or director of human resources. To the extent permitted by the applicable
provisions of the Texas Public Information Act, confidentiality of those reporting dishonest
or fraudulent activities will be maintained. However, the confidentiality cannot be
maintained if that individual is required to serve as a witness in legal proceedings.
INVESTIGATION
Prior to conducting an investigation, the appropriate personnel will communicate as necessary to
establish the necessary investigative team.
All affected departments and/or individuals shall cooperate fully with the investigative team to
identify whether or not actual fraudulent activity has occurred.
The investigative unit shall update university administration on the progress of all investigations.
All requests for information and assistance related to investigations conducted by auditors of
federal and state agencies, which are concerned with potential dishonest or fraudulent activities
within the university, shall be forwarded immediately to the chief audit executive for
consultation with the general counsel.
All inquiries from the suspected individual, their representative, or their attorney shall be
directed to the general counsel without further comment.
All reproduction of documents, evidence, and reports shall be performed within the secured work
area of the University Police Department or Department of Audit Services. Any requests to
release or review such documents will be coordinated through the general counsel.
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In order to protect the reputations of innocent persons initially suspected of wrongful conduct
and to protect the university from potential civil liability, the results of investigations and audits
will not be disclosed or discussed with anyone other than authorized representatives of law
enforcement and/or regulatory agencies and persons associated with the university who have a
legitimate need to know such results in order to perform their duties and responsibilities, subject
to provisions of the Texas Public Information Act.
The results of all investigations will be reported to the president of the university or to the chair
of the Board of Regents Finance and Audit Committee when considered necessary.
Allegations of Defalcation, Misappropriation, and other Fiscal Irregularities
The chief audit executive will supervise all audits of allegations of defalcation,
misappropriation, and other fiscal irregularities. The Department of Audit Services will have full
and unrestricted access to all necessary records, including e-mail, and personnel. All university
equipment, furniture, and contents, including desks and computers, are open to inspection when
there is reasonable suspicion of a dishonest or fraudulent activity which makes such inspection
appropriate; there is no assumption of privacy. The general counsel shall be contacted before
inspection of desks and computers beyond inadvertent or official access. Every effort should be
made to effect recovery of university losses.
Pursuant to Section 321.022 of the Texas Government Code, the president shall file a report with
the Office of the State Auditor if he has reasonable cause to believe that money received from
the state by the university may have been lost, misappropriated, or misused, or that other
fraudulent or unlawful conduct has occurred in relation to the operation of the department or
entity. All records of a communication by or to the state auditor in this regard are legally
considered audit working papers of the state auditor.
Allegations of Criminal Activity
When an audit reveals suspected criminal activity, or an audit is initiated due to an allegation of
criminal activity, the university chief of police will be notified immediately and the audit will
proceed under his direction. The Department of Audit Services shall assist the university police
in investigations of suspected defalcation, misappropriation, and other fiscal irregularities that
require accounting and auditing knowledge of university records.
When suspected criminal activity may constitute a felony offense, the university chief of police
shall, when appropriate, immediately notify the president or his designee. The university chief of
police, chief audit executive, and general counsel will coordinate assistance provided to state,
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federal, and local law enforcement agencies in connection with felony fraud investigations. All
requests for information and/or assistance from such agencies, received by any other component
of the university, shall be immediately forwarded to the university police for determination and
handling. All reasonable assistance will be given to law enforcement agencies when requested.
Audits revealing violations of the Penal Code for which an audit report will be issued shall be
reduced to final report form only after consultation by university police with the local prosecutor
or the Office of the General Counsel to ensure that appropriate documentation of the facts has
been achieved in order to permit appropriate personnel action, protect innocent persons, support
appropriate civil or criminal actions, document claims made pursuant to applicable fidelity
bonds, preserve the integrity of criminal investigation and prosecution, and avoid unnecessary
litigation.
Allegations Involving Employment Conditions
The director of human resources will supervise or assist with all investigations involving
allegations that arise by nature of one’s employment that do not otherwise fall into one of the
above categories.
AUDIT FINDINGS
Each investigation of possible dishonest or fraudulent activities has the potential to provide
valuable insight into university activities. Investigations may disclose control weaknesses or
other deficiencies that require additional auditing or attention by management. The Office of
Audit Services shall consider the nature and extent of the investigation and complete any
additional audit work necessary to provide management with information for appropriate action.
Cross Reference: Ethics (2.6); Tex. Gov’t Code § 321.022
Responsible for Implementation: President
Contact for Revision: Vice President for Finance and Administration
Forms: None
Board Committee Assignment: Finance and Audit
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